Community bankers are well aware of the rising costs of supervision and regulation. These higher costs are likely to reduce earnings for some small banks and, it follows, make some owners more inclined to sell.

However, recent analysis by the Federal Reserve Bank of Minneapolis reveals that the rate of consolidation among community banks has not increased recently. Rather, consolidation rates so far are following historical patterns. This is true even though the cost of increased supervision and regulation is hitting the smallest banks particularly hard.

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